Fixed Asset Program Manual

Impairment of Fixed Assets

Fixed Asset Program Manual Copyright 2013 Rupert Parsons This document is licensed under the Creative Commons Attribution Share Alike License version 3. You may copy, distribute and/or modify it under the conditions stipulated in the copyright licence. Click the link below to view the details of the copyright licence which applies to this publication: http://creativecommons.org/licenses/by-sa/3.0/deed.en

Rupert Parsons 2013

Introduction
This chapter contains the following sections (each section starts on a new page): In the year of impairment The year following impairment Assumed Knowledge This chapter assumes you are already familiar with the accounting concepts governing fixed asset impairments.

Rupert Parsons 2013

In the year of impairment

Go to the the fixed asset which has incurred an impairment loss. Enter the impairment loss in the Cost Adjustment cell (column Z) or the Depreciation Adjustment cell (column AB).* Go to the Reason cell next to the cell where you entered the impairment loss (column AA or column AC). Select 'Impairment' from the drop down list. *If depreciation is charged, normally the impairment loss is reflected in accumulated depreciation. Example: If the original cost of a building was 250,000 and is revalued at 200,000, enter 50,000 in the Cost Adjustment or Depreciation Adjustment cell to reflect the impairment loss:

If an impairment loss is charged prior to the year end and depreciation is charged In this very unlikely situation you will need to override the depreciation charge calculated by the program to reflect the new depreciation charge due to the impairment of the fixed asset. Go to 'If depreciation is charged on the asset which has incurred an impairment loss ' on the next page for further details. To override the depreciation charge calculated by the program: Go to the cell 'Depreciation charge in accounting period' (column V). Unprotect the worksheet (there is no password). Enter (overwrite) the depreciation charge. Protect the worksheet (without a password). The link to the calculated depreciation charge will be restored after you have run the year end procedure.

Rupert Parsons 2013

The year following impairment

In the following year (after you have run the year end procedure): Go to the adjustments made in the previous year for the impairment loss i.e. the Cost Adjustment & Reason cells (columns Z & AA) or the Depreciation Adjustment & Reason cells (columns AB & AC). Delete all entries in these cells. if you do not delete the impairment loss, the fixed asset will be impaired again!

If depreciation is charged on the asset which has incurred an impairment loss The depreciation charge after impairment is based on the new value of the asset and its remaining useful life. Therefore, the asset will need to be re-registered in the fixed asset program in order for the depreciation charge to be calculated correctly. To re-register the fixed asset which has incurred an impairment loss: Go to the the fixed asset which has been impaired. In the Date cell (column C), enter the date when the impairment loss was incurred. Normally impairments take place at the end of the financial year and if this is the case, enter the year end date of the previous year. A warning message will appear when entering assets prior to the current accounting period. When the warning message appears, click 'Yes' to confirm the date. In the Cost / Value cell (column F), enter the new value of the fixed asset (after the impairment loss). In the cell 'Year 1 Depreciation Months' (column M), enter the number of months of the new depreciation charge that was applied in year 1 (i.e. the previous year). This depends on when the impairment occurred in the previous year. If the impairment took place at the end of the financial year, enter 0 (months) and select 'No' in the cell 'Year 1 Depreciation Month of Purchase Included (Yes / No)?'. In the Useful Life cell (column S), enter the estimated remaining useful life of the asset from the date of impairment. Go the 'Depreciation charge in the accounting period' cell (column V) and confirm that the new depreciation charge for the asset has been calculated correctly.

Rupert Parsons 2013